QUESTION: 37

PL currently earns an annual contribution of $2,880,000 from the sale of 90,000 units of
product B. Fixed costs are $800,000 per annum.

The management of PL is considering reducing the selling price per unit to $48. The estimated levels of demand at the revised selling price and the probabilities of them occurring are as follows:

Calculate the probability that the profit will increase from its current level if the selling price is reduced to $48.

The probability therefore that the contribution will exceed $2,880,000 is 90%.
The probability therefore that the contribution will exceed $2,880,000 is 50%.
The probability therefore that the contribution will exceed $2,880,000 is 70%.
The probability therefore that the contribution will exceed $2,880,000 is 40%.

Answer(s): A

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QUESTION: 38

A company manufactures two products and has two production constraints.

When the graphical approach to linear programming is used, the axes of the graph will show:

the two constraints restricting production
the two objectives of the company
the two products manufactured
the contribution generated by the two products

Answer(s): C

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QUESTION: 39

A company has budgeted to produce 5,000 units of Product B per month. The opening and closing inventories of Product B for next month are budgeted to be 400 units and 900 units respectively. The budgeted selling price and variable production costs per unit for Product B are as follows:

Total budgeted fixed production overheads are $29,500 per month. The company absorbs fixed production overheads on the basis of the budgeted number of units produced. The budgeted profit for Product B for next month, using absorption costing, is $20,700.

Prepare a marginal costing statement which shows the budgeted profit for Product B for next month.

What was the difference between the profit calculation using marginal costing and the profit calculation using absorption costing?

$2870
$3010
$2950
$3610
$2750

Answer(s): C

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QUESTION: 40

XY can choose from four mutually exclusive projects. The projects will each last for one year and their net cash inflows will be determined by market conditions. The forecast net cash inflows for each of the possible outcomes are shown below.

If the company applies the maximin criterion the project chosen would be:

Project A
Project B
Project C
Project D

Answer(s): A

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QUESTION: 37

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QUESTION: 39

QUESTION: 40

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